Severfield-Rowen PLC SFR Interim Management Statement

  Severfield-Rowen PLC (SFR) - Interim Management Statement

RNS Number : 3431Q
Severfield-Rowen PLC
05 November 2012
 



               Trading Update and Interim Management Statement

 

Severfield-Rowen Plc (the "Group"), the market leading structural steel group,
issues this Interim Management Statement covering the period from 1 July  2012 
to 5 November 2012.

 

Trading Update

 

The Group's UK businesses continue to operate in a difficult climate with  the 
previously flagged pricing pressure and protraction of contractual settlements
still posing significant challenges  as clients and  the supply chain  compete 
harder in a shrinking market.  

 

Our UK businesses have experienced  mixed performances. Atlas Ward  Structures 
and Fisher Engineering, have performed, and  continue to perform, at or  above 
expectations. Our other businesses, Severfield-Rowen Structures, Watson  Steel 
Structures and Steelcraft Erection Services, which we announced in August will
be merged into Severfield-Watson Structures at the end of 2012, are delivering
below  expectations.  Their  performances  have  been  adversely  affected  by 
unfavourable final account settlements and cost overruns on a small number  of 
contracts, as well as the re-phasing of other projects by clients.

 

As a result, it  is the Board's  view that the Group's  profits before tax  in 
2012 will now  be around  £1 million.  The  Board remains  confident that  the 
ongoing business reorganisation  and the conclusion  of the affected  projects 
will see an  improvement in performance  from Severfield-Watson Structures  in 
calendar Q1 2013, together with  continued strong performance from Atlas  Ward 
Structures and Fisher Engineering. 

 

UK

 

All four UK  factories are  producing at  planned levels,  underpinned by  our 
consistently strong order book (currently £211 million) and market position.

 

The Group achieved constant levels of revenues in the period. The  performance 
levels at Atlas  Ward Structures  and Fisher  Engineering have  been good  and 
these are expected to be sustained in the coming periods.

 

However, despite maintained revenues, UK profitability in 2012 is now expected
to be materially  lower, as a  result of the  performance of  Severfield-Rowen 
Structures, Watson Steel Structures and Steelcraft Erection Services.

 

The  re-organisation  of  these  businesses,  announced  in  August  2012,  is 
proceeding to  schedule with  the new  company, Severfield-Watson  Structures, 
being established from 1 January 2013, supported by a small number of external
management appointments.  The  re-organisation is  likely to  see a  headcount 
reduction in these businesses of  around 50 positions.  The resultant  changes 
will deliver overhead savings of greater than £2 million which, combined  with 
improved performance in  contract engagement  and execution,  are expected  to 
return operating margins to between 5%  and 6%, over time.  One-off costs  for 
the delivery of the new organisation are not expected to exceed £1 million and
will be non-underlying.

 

Demand in the  UK remains  depressed, however  the Group's  order book  levels 
continue to  be consistently  strong.   Our outlook  for  UK demand  does  not 
anticipate a  recovery,  but  we  remain confident  that  our  market  leading 
position and  identified future  prospects will  enable the  Group to  sustain 
activity levels in the coming periods.

 

JSW Severfield Structures Ltd (JSSL), India

 

Operations in  India have  made good  progress  and are  pleasing to  both  JV 
partners.

 

The current order book of £31  million supports activity through its  calendar 
Q2 2013, and is strongly backed by a robust pipeline of project enquiries, now
totalling in value £168 million.

 

The planned expansion at  our Bellary operations,  lifting output from  35,000 
tonnes to 55,000 tonnes by  summer 2013 is under  way and remains on  schedule 
and to budget.

 

The level of prospects and opportunities in a wide range of market sectors  is 
very encouraging.

 

Directors

 

Geoff Wright  has supported  the Company  since September  2006 serving  as  a 
non-executive director on  the main  board, providing valuable  advice on  the 
status and trends of the UK commercial markets.  Geoff has continuously served
as a member of the Remuneration, Audit and Nominations committees.

 

Geoff will stand down from  his role at the end  of 2012 but will continue  to 
provide advice in some  commercial areas.  The Board  and the Company  express 
their sincere appreciation for his contributions.

 

Financial Position

 

As announced in August, net borrowings at the half year period end were  £28.3 
million and we continue to target a modest improvement in debt levels for  the 
calendar year, despite the reduced profit outlook.

 

Cash generation  and conservation  remain a  key focus  for the  business  and 
accordingly, there will be no second  interim dividend for 2012 but the  Board 
will consider the final dividend level in 2013.

 

Outlook

 

The Company's results this year are being adversely impacted by a small number
of projects  in three  of our  UK businesses.   However, our  overall  leading 
position in terms of market share and activity is undiminished. 

 

The UK order book  and the known  mix of secured  projects, together with  the 
reorganisation of the  affected businesses, lead  us to expect  a recovery  in 
business performance starting in 2013.

 

In India, we see very strong demand  for our services and we will continue  to 
work with our partner to grow the business at the fastest appropriate pace.

 

 

 

T Haughey

Chief Executive Officer

 

 

 

For further information, please contact:

 

Severfield-Rowen Plc                           Tom Haughey
                      01845 577896

                                                         Chief Executive
Officer

                                                         Alan Dunsmore
                   01845 577896

                                                         Finance Director

                                                         John Dodds
                         01845 577896

                                                         Chairman

Jefferies Hoare Govett                         Simon Hardy
                       020 7029 8000

                                                         Harry
Nicholas                     020 7029 8000

Pelham Bell Pottinger                         Archie
Berens                      020 7861 3112

                                                         Guy
Scarborough                 020 7861 3870

                     This information is provided by RNS
           The company news service from the London Stock Exchange
 
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IMSUGGBCGUPPGWA -0- Nov/05/2012 14:00 GMT